2G Spectrum Scam: Sibal, Montek – Full Spin Forward

February 11, 2011

Over the last few months, Indians have witnessed the exposing of Telecom 2G scam. Faced with prospect of an indictment in the court of public opinion and also the Supreme Court, recent days have seen a new spin strategy by the Government. Inspired by George Bush’s shock and awe strategy that created a disaster for the US, I call it the “Obfuscate and Confuse strategy” which has three main planks. Blame all misdeeds on Independent Regulator TRAI and previous governments, attack the credibility of the statutory authority – CAG, and hide behind the always available fig leaf of Consumer Benefit and Aam Aadmi.

And do this by putting two of the smoothest talking persons in the team, who have (or did, at least till recently) some credibility on economic and legal issues with the media and general public. In reality, every single defense given by Sibal and Montek raises serious questions about their own credibility and understanding of fundamental issues of public policy. Let’s deal with their arguments briefly:

First, they would like you to believe that TRAI opposed auctions and they had no choice but to follow the regulator, is what I was told in reply to my question in Parliament by the then Minister. The reality as it turns out is quite different. Firstly, the TRAI did recommend a market mechanism to discover entry fee for 2008 in Section 2.73 of the same recommendations that Sibal continues to thrust down the media’s throat. If the government was in doubt, it should have simply gone back to TRAI asking to clarify this position vis-à-vis Government’s assumed position that TRAI opposed auctions. Moreover, if they didn’t have the good sense to do it, TRAI – three months in advance of the scam - repeatedly cautioned the government to not proceed with the recommendations without consulting it. It was concerned about manipulation and cherry-picking. Sibal has no answer why those letters from the statutory regulator were ignored.

Finally, even a first year law student will know that the TRAI Act allows the government to modify or reject TRAI recommendations – and they routinely do. Sibal also has no answers for why the government violated TRAI recommendations regarding no cap, restrictions on M&A and rollout obligations. Each of these were changed repeatedly to make sure that companies could make a windfall without investing a penny in the infrastructure. But Sibal wouldn’t tell you all this – it just doesn’t suit him to reveal this little fact.

Now to Mr. Sibal’s and Montek’s allegations of CAG’s erroneous calculation of loss. Unlike Mr. Sibal’s bizarre arithmetic, unsupported by evidence, calculation or methodology, the CAG, by sharp contrast (for those who have read the report) has given detailed evidence of how they reached the loss figure. The CAG has not made a single assumption in reaching its conclusions. It has purely based its loss on evidence belonging in the DoT files and TRAI recommendations. The STel offer letter for spectrum, Unitech’s enterprise value without a single customer or rupee in revenue, and a mapping of 2G revenues to 3G – based on explicit recommendations made by TRAI (the same TRAI that Sibal swears by) as late as May 2010, Section 3.82 read with Table 3.4. Mr. Sibal’s mathematics flies in the face of license agreements, tender documents, DoT affidavits and license guidelines – perhaps too much evidence for a Union Minister busy juggling three portfolios.

Even more bizarre is the argument of benefitting the economy and the Aam Aadmi perpetrated by Sibal and sadly propagated by Montek. For the economy and consumers to benefit, and for the CAG to take tax and revenue implication into calculations – the operators in question would have had to launch service, build infrastructure, own subscribers and bill revenues. The companies in question are defaulters. Sibal himself has served them Show Cause Notices, quite apart from the fact that CAG believes that 89 of them have fraudulently accessed spectrum by misrepresenting facts on applications.

Do you have to be a lawyer, Union Minister and the Vice-Chairman of Planning Commission to know that revenue share and spectrum charges can only come if you have revenue? With a cumulative market share of less than 5%, these companies are waiting to sell as soon as M&A guidelines collapse in February 2011.

As a country, we should not leave unchallenged, the smooth talk and spin being put out by Montek and Sibal. They can be meticulously and easily dismantled to reveal the Obfuscation and confusion that it is. Montek’s recent interview makes a torturous case, stretching all financial logic, that the private companies did not make any profit. But it is a worrying and sad day where a Member of Parliament and media have to convince a Minister and the Vice-Chair of Planning Commission to tell them how to protect government revenues and public interest through an open, transparent auction process which is a norm and not an exception for giving away scarce resources, except, perhaps, in Banana republics – a description recently used to characterize India by a leading Indian Business Icon!

Finally, a piece of advice for them – You are misreading the mood of the nation – Smooth talk and spin are no replacement for a real investigation and a determination of the truth. Let the Supreme Court and CBI do their job and please don’t lose any further credibility in an attempt to influence the ongoing investigation. Your stance will make it impossible for the government to collect any money or prosecute the perpetrators since you have already given the white-collared criminals a clean chit. Please understand – if there is no crime (loss), then there are no criminals (DoT officials / private companies). Any other procedural lapse (as Sibal now describes this scam) will boil down to an academic experiment with policy. Please stop insulting the intelligence of the Indian citizenry and for once let the truth prevail.